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Shareholders’ Rights and Remedies

24. Shareholders’ Rights and Remedies. © Oxford University Press, 2007. All rights reserved. Shareholder Rights & Remedies. Learning Objectives: Understand what remedies are available to shareholders; Explain what rights and duties shareholders have vis-à-vis a company;

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Shareholders’ Rights and Remedies

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  1. 24 Shareholders’ Rights and Remedies © Oxford University Press, 2007. All rights reserved.

  2. Shareholder Rights & Remedies Learning Objectives: • Understand what remedies are available to shareholders; • Explain what rights and duties shareholders have vis-à-vis a company; • Explain what is meant by shareholder ratification and what breaches can be ratified; • Understand when a derivative action may be available to shareholders.

  3. Shareholder Rights & Remedies cont ... MINORITY v MAJORITY SHAREHOLDERS • Shareholders are entitled to rights under the Corporations Act 2001 (Cth). • Minority shareholders are provided with additional rights and remedies because of their perceived vulnerability: s.232 Corporations Act.

  4. Shareholder Rights & Remedies cont… Minority Shareholders

  5. Shareholder Rights & Remedies cont ... SHAREHOLDER RATIFICATION • Additional rights given to shareholders include the right to ratify a directors’ breach. • Ratification has the effect of excusing a company officers breach. • Consider interests of creditors.

  6. Shareholder Rights & Remedies cont… MEMBER RESOLUTIONS • Members can also affect company matters by putting forward a resolution. • Hurdle requirements for the resolution to be accepted (50% ordinary), (75% special).

  7. Shareholder Rights & Remedies cont… SHAREHOLDER REMEDIES The Corporations Act provides a number of remedies to shareholders including: • Oppression Remedy; • Injunction; • Winding Up Order; • Statutory Derivative Action; In addition shareholders have their own personal rights that they can pursue against the company.

  8. Shareholder Rights & Remedies cont… OPPRESSION REMEDY: s.232 • Designed to provide minority shareholders with an enforceable remedy against the company for conduct that may have been prejudicial to the minority’s interests.

  9. Shareholder Rights & Remedies cont… Oppression Remedy • Under s.233 of the Corporations Act the types of remedy that are available to a litigant are extensive and include: • injunctions, • wind-up orders, • modification of company’s constitution and injunctions.

  10. Shareholder Rights & Remedies cont… Circumstances giving rise to Oppressive Conduct:- • factual matrix of the case; • material conduct giving rise to the allegation of unfairness; • conduct of the majority shareholders; • impact of the alleged act on the interests of minority shareholders.

  11. Shareholder Rights & Remedies cont… Additional Remedies Available to Shareholders:- • Injunction • Winding Up Order • Derivative Action • Member’s Personal Rights

  12. Shareholder Rights & Remedies cont… STATUTORY DERIVATIVE ACTION: S.236 • Major shareholder initiative of the government’s changes to the Corporations Act. • Response to the perceived shortcomings of pre-existing remedies where the company was unwilling or unable to act. • Provides shareholders with an action against the company whereby proceedings are brought in the company’s name • The derivative action has proven to be a successful initiative in both state and federal courts.

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